Hospitals: When the Uninsured Get Injured, How Do You Collect?
By Kamran Abdo CEO Med Care Solutions
It happens every day: People who do not have medical insurance – or the means to pay for their medical care out of pocket – arrive at emergency rooms with injuries that require treatment. Not surprisingly, once the hospital provides this treatment, reimbursement for payment becomes a problem. What are hospitals’ revenue cycle management options when dealing with self-pay accounts for injured indigents? And what are the pros and cons of each of these options?
For accident victims, treatment is provided on a medical lien basis
If the patient is obviously at fault for causing their injury, the hospital’s only real option is to open a self-pay account and follow their usual collections procedures. But if the patient is a victim of an accident for which someone else may eventually be held liable, treatment is usually provided on a medical lien basis. In this case, the hospital can either keep the lien on their own books or sell it to a third party such as my company, Med-Care Solutions.
Although collections may be more successful for medical liens than they are for the accounts of self-pay indigents whose situations do not qualify for medical liens, a medical lien does not guarantee that the hospital will receive any payment at all. In addition, there very specific and resource-intensive challenges that hospitals must shoulder while pursuing possible resolution of these accounts.
Pros and cons of holding on to medical liens
Because of the inherent hassles and issues related to medical liens, for the hospital there’s only one good argument in favor of holding onto the liens. If and when the indigent patient’s legal case eventually settles, if the medical lien is paid, the hospital will recover some of the settlement proceeds – and the amount that the hospital recovers in this situation may be more than what the hospital would have received from assigning the lien.
The “con” side of the list includes the following important points:
- On average these cases take 3 years to go through the legal system.
During that time the Accounts Receivable remains on the hospital’s books, and the hospital receives no payments at all.
- There is no guarantee that the hospital will ever be reimbursed for the services provided. Many things can happen. The legal case may not be decided in the patient’s favor. Collecting from the defendant can prove impossible. If the patient’s attorney is not contacted in a timely manner, the case may conclude and the attorney may simply stop responding to requests. Etc.
Managing medical liens is extremely costly and time-consuming. Hospitals are often extremely inefficient at collecting on these types of accounts. Considering how labor-intensive the process is, and how long the process takes, this is really not a surprise – and the significant costs associated with medical liens due to the voluminous 3 years average backlog of accounts just adds to the problem.There are many challenges that must be overcome in order to manage medical lien accounts. First, the hospital must have robust technology systems and a significant number of trained personnel in place. Providers must ensure that a lien is recorded with the county as soon as care is provided. They must follow up with the patient to determine if the patient has engaged the services of an attorney, and if the attorney has filed a lawsuit on the patient’s behalf. Then they must keep track of the patient’s representation, as it often happens that patients retain new counsel mid-way through the process, and continuously follow up with the patient and the attorney regarding the status of the legal case. In addition, they must also identify who the insurance company is, and establish and maintain a direct line of communication with them, in case it becomes difficult to reach the patient’s attorney.
- The hospital may need to employ legal counsel. In addition to the costs borne by the Accounting and Collections Departments, hospitals often need to employ legal counsel to file the liens, and to file legal action against attorneys who ignore the outstanding claims and simply do not pay. Unfortunately, attorneys have priority lien on these cases. Depending on how much effort this requires, attorneys may take 20 to 50% of the lien proceeds once the money is received.
Pros and cons of selling medical liens to third parties
For most hospitals, the best option for revenue cycle management is to assign and get reimbursed for medical liens by qualified third parties companies. The only possible con of this option is that liens are sold at a discount to their maximum value; the lien amount at the time of collection may be less than that of what the purchaser received at the time of the assignment.
On the “pro” side the hospital can:
- Get immediate payment & get the lien off the books. Med-Care Solutions, for example, provides payment in less than 30 days – which is quite a bit better than a two- to three-year wait!
- Improve cash flow. Get a known payment now versus the potential for an unknown payment years from now.
- Access a stable and consistent revenue source. This revenue source is completely independent from private health insurance and/or Federal, State and local government funding. It does not rely on any taxpayer dollars, and there are no funding cuts on the horizon.
- Save hours of staff time. As explained above, managing medical liens is extremely labor-intensive and costly.
- Eliminate collection risk. Hospitals that choose to hold on to their medical liens increase their average days out and shoulder the overhead while taking significant reductions or hoping that a court case will be decided in their favor. Few hospitals can afford to go this route. In contrast, my firm purchases lien-based receivables without recourse. If the lien ultimately is not collectable, we assume the entire loss.
- Ensure patients have immediate access to the care they need. Med-Care, for example, can authorize procedures in less than 24 hours.
When the uninsured get seriously injured, hospitals are legally required to provide care for them regardless of their ability to pay. Medical lien funding is an excellent way for hospitals to receive almost immediate reimbursement for the services provided without the need to shoulder any of the burdens or risks associated with collecting on medical lien-based accounts.
About Med-Care Solutions
Kamran Abdo is the Managing Partner of Med-Care Solutions. Med-Care Solutions is a leader and one of the oldest companies in the lien-based receivable funding industry, with over a decade of experience in this space. The firm specializes in making it easy for hospitals and other healthcare providers to accept indigent patients without worrying about the collection risks. For more information, please visit www.medcaresolutions.us.
Dr. Kamran Abdo